Buying or selling a business with sponsored workers: what happens to the sponsor licence?

Buying or selling a business that employs sponsored workers raises immigration issues alongside the usual corporate and employment considerations. A change in ownership can affect the sponsor licence, even where employees remain in the same jobs and the business continues trading as before.

The issue can arise across sectors, from a care provider employing sponsored care staff to a technology company retaining software developers or an engineering business relying on specialist employees. Where those workers are important to the business being acquired, sponsorship needs to form part of the transaction planning.

Buyers and sellers should establish the requirements early, rather than treating immigration compliance as an administrative task after completion.

If you are buying or selling a business, contact our solicitors for advice that brings together corporate and immigration expertise, from due diligence through to completion and ongoing sponsorship responsibilities.

Does a sponsor licence transfer with the business?

A sponsor licence is not transferable. Depending on the transaction, the existing licence may be revoked or made dormant, and a new licence may be required.

The position depends on the ownership change, the entities involved and what happens to the sponsored workers. Buying a business with a licence does not automatically give the buyer permission to sponsor its employees.

Immigration advice should therefore be part of transaction planning, alongside the review of contracts, employees, assets, and liabilities.

Can a share sale affect the sponsor licence?

In a share sale, the company employing the workers may remain the same legal entity. That can lead parties to assume its sponsor licence will continue unaffected.

However, a change in direct ownership, including the transfer of a controlling shareholding, can trigger the requirement for a new licence. Keeping the same company name, registration number and employment contracts does not resolve the sponsorship position.

For example, where a buyer acquires all the shares in a company that sponsors skilled workers, the employing company may need to apply for a replacement licence under its new ownership. The buyer should not assume that a licence held by another company in its group automatically covers the acquired business.

Minority investments, changes higher up a corporate group and internal restructurings require their own assessment. Some changes may be reportable without requiring a replacement licence. Advisers need to understand the ownership structure before and after completion to establish the correct approach.

What happens in an asset or business sale?

An asset or business sale may involve employees moving from the seller to the buyer. Where the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) apply, employment contracts and continuity of employment are generally protected.

However, employment protection and immigration compliance are separate considerations. The parties must establish how sponsorship responsibility will be managed as part of the transfer.

Buyers should identify which sponsored workers are transferring, which entity will employ them and whether that entity holds a licence covering the relevant immigration route. Sellers should establish their reporting responsibilities and what will happen to any sponsored workers remaining in the business.

Where the buyer already holds the appropriate licence, it takes responsibility for workers transferring under TUPE or similar protection from the transfer date and must confirm that responsibility to the Home Office.

If it does not hold the necessary licence, it must make a valid application for one, or apply to extend its existing licence, within the applicable 20-working-day period.

Will sponsored employees need new visas?

A transfer does not necessarily mean every sponsored employee needs a fresh visa application.

Where workers move under TUPE or similar protection, a new application and certificate of sponsorship may not be required if the relevant conditions are met. These include the new sponsor holding the appropriate licence, accepting sponsorship responsibility and the workers’ duties remaining unchanged.

The position should be checked for each affected group of employees. Buyers should also consider their plans after completion. Changes to roles, duties, salaries or working arrangements may create reporting obligations or require a new immigration application.

For example, moving an acquired employee into a different role elsewhere in the buyer’s group should be reviewed before the change takes effect.

What are the reporting and application deadlines?

Relevant ownership changes must normally be reported to the Home Office within 20 working days.

Where sponsored workers transfer under TUPE or similar protection and the new employer lacks the appropriate licence, a valid licence application, or an application to extend an existing licence, must be made within 20 working days of the move.

Other ownership changes can also trigger licence application requirements. The precise steps and deadlines depend on the transaction, so the parties should establish these before completion.

Missing a deadline, or having a required application refused, can put affected workers’ immigration permission at risk.

The transaction timetable should identify each report and application, the relevant deadline and the person responsible. Buyers and sellers may have separate obligations, so responsibility should not be left to assumption.

What should buyers check during due diligence?

Checking that a business appears on the register of licensed sponsors is a starting point, rather than a complete assessment.

Useful enquiries include:

• Which legal entity holds the licence and which immigration routes it covers.
• Whether the licence covers other entities or branches within a group.
• Which employees require sponsorship and when their permission expires.
• Whether sponsored roles, salaries and working arrangements match the records.
• Whether there has been Home Office correspondence, enforcement action or a compliance visit.
• Whether previous ownership changes or internal restructurings were properly reported and any necessary licence applications made.
• Whether any applications or reporting obligations remain outstanding.
• Who manages the licence and whether those people will remain after completion.
• Whether sponsorship records and Right to Work evidence are available for review.

The purpose is to understand both the immediate transaction requirements and the arrangements the buyer will need to manage afterwards.

Where problems emerge, the parties can consider what must be resolved before completion and how any remaining risk should be addressed in the transaction documents.

Do buyers need to carry out Right to Work checks?

Sponsorship arrangements and Right to Work checks are separate requirements. Dealing with the sponsor licence does not, by itself, establish that the buyer has appropriate evidence for every employee.

Where employees transfer under TUPE, the seller’s checks can be treated as having been carried out by the buyer. However, deficiencies in those checks can leave the buyer exposed. Reviewing the records during due diligence helps identify missing evidence and establish what fresh checks are needed.

Home Office guidance provides a 60-calendar-day period for fresh checks on employees acquired through a qualifying TUPE transfer. That is separate from the 20-working-day sponsorship deadlines and does not postpone follow-up checks already due for employees with time-limited permission.

In a share sale, the employing company generally remains unchanged. Its existing checks should still be reviewed as part of the buyer’s assessment of the business.

What should sellers prepare?

Sellers can help avoid late enquiries by assembling accurate sponsorship information at an early stage.

That includes identifying sponsored employees, locating relevant records and establishing who can answer questions about the licence. Immigration advisers should receive the proposed ownership structure and transaction timetable, rather than being asked to assess the position from a general description of the sale.

The parties should also identify the evidence needed to support Home Office reports and applications. Relevant documents may include the executed sale agreement, confirmation of the ownership change and details of transferring workers.

Sellers should plan for the departure of anyone responsible for managing sponsorship. Access to the sponsor management system and responsibility for outstanding tasks should be addressed before key personnel leave.

How should sponsorship be addressed in the transaction documents?

The documents should reflect the practical steps identified by the corporate, employment and immigration advisers.

Depending on the transaction, matters to consider include:

• Responsibility for licence applications and Home Office reports.
• Cooperation in providing supporting documents.
• Access to sponsorship and employee records.
• Disclosure of existing compliance concerns.
• Appropriate warranties or indemnities.
• Responsibility for fees and post-completion work.

Contractual protection cannot replace compliance with Home Office requirements. Its purpose is to make responsibilities clear and allocate risk between the parties.

What if the transaction has already completed?

If a business has changed ownership without the sponsorship position being reviewed, seek advice promptly.

The first task is to establish what changed, when it happened, which workers are affected and what action has already been taken. Advisers can then assess the applicable requirements and any outstanding deadlines.

Gather the transaction documents, licence details, sponsored employee information and relevant Home Office correspondence. Avoid assuming that the absence of an immediate problem means no action is required.

How our solicitors can help

Buying or selling a business with sponsored workers requires corporate and immigration advice to be considered together. The ownership structure, completion timetable and plans for employees can all affect the steps needed to maintain sponsorship.

Our business immigration solicitors work alongside our corporate team, which advises on business and company sales, purchases and restructuring. We can identify sponsorship requirements during due diligence, advise on licence applications and reporting obligations, and address the allocation of responsibilities in the transaction documents. 

Our employment team can also advise on TUPE and proposed workforce changes.

Sanae Sahebjalal, head of corporate immigration at SO Legal, comments:

“Sponsorship should be considered alongside the commercial terms of a transaction, particularly where retaining sponsored employees is important to the buyer. Bringing corporate and immigration advice together helps identify what needs to happen before and after completion, who is responsible and how those steps fit into the wider deal.”

If you are buying or selling a business with sponsored workers, contact our solicitors for coordinated advice on the transaction and its immigration requirements.